Break-even analysis answers the first question any business has to answer: how much do we need to sell before we stop losing money? Below that volume every month consumes cash. Above it, each additional sale contributes profit.
This calculator finds that volume from your fixed costs, variable cost per unit and selling price, and shows how sensitive the answer is to each of those three inputs.
The formula, and why contribution margin is the real variable
Break-even volume is fixed costs divided by contribution margin per unit. Contribution margin is what remains from each sale after the variable cost of producing it, and it is the number that actually determines the answer.
Break-even units = Fixed costs ÷ (Price per unit − Variable cost per unit)
- ·Fixed costs = rent, salaries, software, insurance — anything you pay regardless of volume
- ·Variable cost = materials, packaging, payment fees, shipping — anything that scales with each unit
- ·The denominator is contribution margin per unit
A worked example
Suppose fixed costs run 200,000 a month. You sell at 500 a unit, and each unit costs 300 to make and deliver. Contribution margin is 200 per unit, so break-even is 200,000 ÷ 200 = 1,000 units a month.
Now raise the price by 10%, to 550. Contribution margin becomes 250, and break-even falls to 800 units — a 20% reduction in the volume you need. Instead, cut variable cost by 10%, to 270. Contribution margin becomes 230 and break-even falls to 870 units, a 13% reduction.
The same percentage change produced substantially different results. This asymmetry is the most useful thing break-even analysis teaches, and it holds in almost every business: price moves the break-even point harder than cost does, because a price increase flows entirely into contribution margin while a cost reduction only removes part of it.
| Scenario | Contribution margin | Break-even units | Change |
|---|---|---|---|
| Baseline | 200 | 1,000 | — |
| Price +10% | 250 | 800 | −20% |
| Variable cost −10% | 230 | 870 | −13% |
| Fixed cost −10% | 200 | 900 | −10% |
Break-even on revenue rather than units
Businesses selling many different products cannot express break-even in units. The equivalent is the contribution margin ratio: contribution margin divided by price, expressed as a percentage of revenue.
Break-even revenue = Fixed costs ÷ Contribution margin ratio
- ·Contribution margin ratio = (Price − Variable cost) ÷ Price
- ·In the example above: 200 ÷ 500 = 40%
- ·Break-even revenue = 200,000 ÷ 0.40 = 500,000 per month
What break-even analysis does not tell you
- ·It assumes price stays constant: Selling twice the volume often requires discounting, which lowers contribution margin exactly when you are relying on it. Model the discounted price rather than the list price.
- ·It assumes costs stay linear: Fixed costs are only fixed within a range. Doubling output may require another shift, another machine or a bigger unit, which steps fixed costs up abruptly.
- ·It ignores timing: Breaking even on paper while customers pay in 90 days is not the same as breaking even in cash. Many profitable businesses fail on working capital.
- ·It says nothing about demand: The calculator tells you the volume required. Whether the market will actually buy that volume at your price is the harder question, and no formula answers it.
Pair this with margin analysis
Break-even tells you the volume you need. The profit margin calculator tells you what each sale contributes once you are past it, and the markup calculator helps you set the price in the first place. The three answer different halves of the same question.
The margin of safety
Once you know break-even, the more useful derived figure is your margin of safety: how far current sales sit above the break-even point, as a percentage. A business selling 1,300 units against a break-even of 1,000 has a 23% margin of safety, meaning sales could fall by roughly a quarter before it starts losing money.
That number is a far better indicator of resilience than profit alone, because it tells you how much shock the business can absorb before the arithmetic turns against it.
Last reviewed August 2, 2026 · How we check our calculators